Fixed costs extension: Survival of the fittest in the legal industry?

fixed costs extension

The changes to costs recovery and the extension of the fixed recoverable costs (FRC) regime to most civil claims in England and Wales has sparked both positive and negative reactions within the legal industry. The new regime, which was implemented from October 2023, will significantly impact the way legal costs are managed and recovered.

Whilst some view these changes as a positive step that will bring more certainty and efficiency to the legal process, others have expressed concerns about potential negative effects, such as reduced access to legal help and the risk of cutting corners to maintain profitability.

The Law Society has raised concerns and sought clarity from the government on the rollout of the fixed recoverable costs regime.

Additionally, there have been pleas for a postponement of the new regime due to continued uncertainty and the potential for adverse consequences.

Costs lawyers, however, have expressed optimism about the impact of the fixed costs extension, with nearly half of them predicting that there will still be plenty of opportunities despite the changes.

One positive impact of the changes may be the removal of the unprepared, weaker firms within a crowded legal market.

Survival of the fittest within the legal industry

Currently, the legal industry, for civil litigation, is an overcrowded market, making it difficult for even the best firms to really stand out. The extension of the fixed costs regime has the potential to positively impact the industry by addressing those who cannot compete on service with reduced costs thus, allowing top firms to excel.

The fixed costs system aims to bring more certainty and efficiency to the legal process, creating a more level playing field. Through the standardisation of the costs that a successful party can recover, the system may reduce the ability of  firms to overcharge and thrive on inefficiency.

This could incentivise firms to focus on providing high-quality and cost-effective services, allowing the best firms to stand out.

Moreover, firms that may not have adequately prepared for the changes could face challenges which may lead to their eventual closure.

Whilst the fixed recoverable costs extension may create a more level playing field and encourage the best firms to shine, it is evident that there are differing views on its potential effects – but the true impact on the legal industry, remains to be seen.

How Recovery First can help

If you’re concerned that the recent fixed costs changes are likely to have an impact on the survival of your law firm, you may wish to consider exiting a legal market.

Selling Work in Progress (WIP) as a means to exit any market can serve as a beneficial strategy for firms impacted by the new fixed costs rules. This approach enables firms to redirect their attention towards more lucrative practice areas.

In the worst-case scenario, you may be required to close your firm due to insolvency. Recovery First can assist you in this situation to ensure a compliant closure mitigating the risk of SRA intervention.

Whichever route you choose to take for your firm, Recovery First will ensure the most positive and profitable outcome is achieved.

Our clients receive 100% of their recoverable WIP, plus their allocated entitlement to deductions from damages, anecdotally returning significantly higher value than a traditional WIP sale.

The unique scheme offered by Recovery First is suitable for both law firms and for professional advisors working with law firm clients.

Our team manage the transfer of files from start to finish; placing case files with an approved law firm to protect the integrity of the client’s case, while at the same time maximising the value of the work in progress.

We guarantee 100% confidentiality for all clients. If you would like to find out more about Recovery First’s process, feel free to get in touch today.

It's never too late to speak to Recovery First. Contact us now in the strictest confidence

Sally Dunscombe:

sally.dunscombe@recoveryfirst.co.uk

David Johnstone:

david.johnstone@recoveryfirst.co.uk

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